Chief operating officer Barry Bragg said the company had decided to go ahead with a five-year plan for development and extraction in a new area of the mine. The decision was communicated to Spring Creek staff Friday morning.
“After many months of work we now have a credible mine plan which has been externally peer reviewed by an Australian mining consultant and we believe that the mine can be viable if it meets the development, production and market targets for accessing a further 3.1 million tonnes of coal to the northwest of the current mining area,” Bragg said .
“During this time we have been in discussion with potential new and existing customers, in New Zealand and overseas, and have letters of intent to purchase the coal production from this new area. We now have to convert these commitments into contracts over the next few months.”
Solid Energy plans to invest $NZ25 million over three years in new equipment for the mine, including two new road headers, and upgrading the coal washery to produce a low ash, low sulfur coal for international thermal and steel making markets.
The company will also begin recruiting up to 15 experienced mineworkers. A technical recruitment campaign is underway in New Zealand and overseas. Solid Energy said it has had a good response to recent advertising for trainee mineworkers for its West Coast underground operations.
Coal extraction in the current mining area will finish at the end of this month. Work will then start on development driveage to open up the new area ready for coal extraction to begin in the last quarter of 2007.
About 7000t of coal a month will be produced during the yearlong development phase with production ramping up to 65,000t a month thereafter (about 800,000t per annum).
Solid Energy will also begin detailed planning to develop a subsequent 15-year plan for the Rapahoe sector of the mine to access an additional 15Mt of reserves.
“We appreciate that the uncertainty over the mine has been difficult for our staff and their families, but we had to be certain that in making this decision we had carried out a rigorous and comprehensive assessment of the mine plan and the mine’s financial viability based on customer commitments,” Bragg said.
“Since May this year, when we moved into coal extraction in the first block of thick coal at Spring Creek, extraction has exceeded all productivity expectations. This, and testing of the proposed washery upgrade, has given us the confidence that we can extract and process low ash, low sulfur coal which should attract a premium price in international markets and as a result secure a long-term future for the mine.
“Underground mining remains challenging; as a price taker we will need to secure customer contract prices which reflect the forward projections for thermal coal and ensure that the mine continues to meet development and production targets going forward.”